IA AG Tom Miller: Playing “Survivor” with Homeowners’ Futures

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You may have heard that the Obama Administration and IA Attorney General are playing a giant game of Survivor with the homes of struggling Americans as the grand prize: they’ve kicked NY AG Eric Schneiderman off the island.

The New York Attorney General’s office was removed from a group of state attorneys general that is working on a nationwide foreclosure settlement with U.S. banks, according to a state official.

New York Attorney General Eric Schneiderman, who has raised concern about terms of a possible deal, was removed from the executive committee of state attorneys general, according to an e-mail today from Iowa Assistant Attorney General Patrick Madigan.

Only they made a key mistake in their little game of Survivor.

Update: I obviously misread IA Asst AG Patrick Madigan and IL AG Lisa Madigan. Meaning Miller’s the one making this public, not AG Madigan.

Well then I guess he’s just being a dick.

Update: Wow, in the longer version of the Bloomberg story, Miller gets even more dickish:

“New York has actively worked to undermine the very same multistate group that it had spent the previous nine months working very closely with,” Miller said. For a member of the executive committee, that “simply doesn’t make sense, is unprecedented and is unacceptable,” Miller said.

[And I removed my earlier screwup.]

Fed Lending: Bailing Out Banks over People

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Bloomberg has a good summary and even better visual database of the various forms of Fed lending that have been revealed over the years since the bailout.

I encourage you to go play around in the database. For example, check out this summary of how the Fed lent Hypo Real Estate Holding AG, a German real estate company, $28.7B to keep the German banking system afloat after HRE’s subsidiary Depfa crashed in Ireland. Germany had already given HRE $206B; the Fed’s lending amounted to $21M for each of HRE’s 1,366 employees. And at its height, just the Fed’s lending represented 15,000% of HRE’s market value. And yet all of this remained a secret for three years after the Fed first started lending to HRE.

With the scope of all that in mind–with a way to visualize the incredibly leveraged house of cards this secret lending held up–now read what I consider to be the most important line in Bloomberg’s summary.

By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.” [my emphasis]

That is, the money the Fed lent out to these highly leveraged risk takers could have paid off (much less merely guaranteed) the 6.5 million delinquent and foreclosed mortgages that are currently dragging down the American economy.

But instead of offering money to homeowners who would have used it to stay in their homes and sustain their neighborhoods, the Fed instead loaned it to the banks that were leveraged to the hilt.

So here we are worried about the moral hazard of modifying principal on loans that were vastly overvalued. Here we are shredding the rule of law to try to let Bank of America (which borrowed $91.4B) off for its crimes for a mere $20B or so.

And, for the most part, all those corporations that secretly sucked of the Fed’s teat are still in business, gleefully lecturing others about moral hazard.

The Global Crisis of SOME Institutional Legitimacy

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Felix Salmon has a worthwhile (but, IMO, partly mistaken) post on what he deems “the global crisis of institutional legitimacy.” I think he’s right to see this as a significant challenge to our current political economy.

While watching another Arab government get toppled on Sunday evening — this time that of Muammar Gaddafi, in Libya — I was also reading George Magnus’s excellent note for UBS, entitled “The Convulsions of Political Economy”; you can find it chez Zero Hedge.

Convulsions is right — not only in the Arab world, of course, but also in Europe and the US. And the result is arguably the most uncertain outlook, in terms of the global political economy, since World War II ended and the era of the welfare state began.

As Magnus says:

It seems that we are having sometimes esoteric tiffs between Keynesians and Austrians about if and how governments should sustain jobs and growth. But, deep down, we are having a much more significant debate as we are being forced to redefine what we think about the rights and obligations of citizens and the State.

Most fundamentally, what I’m seeing as I look around the world is a massive decrease of trust in the institutions of government.

But I think Salmon makes two mistakes. First, he maintains an unwarranted distinction between the Arab Spring and the UK riots.

Where those institutions are oppressive and totalitarian, the ability of popular uprisings to bring them down is a joyous and welcome sight. But on the other side of the coin, when I look at rioters in England, I see a huge middle finger being waved at basic norms of lawfulness and civilized society, and an enthusiastic embrace of “going on the rob” as some kind of hugely enjoyable participation sport. The glue holding society together is dissolving, whether it’s made of fear or whether it’s made of enlightened self-interest.

From the perspective of the underclass in our society, it has been some time since “enlightened self-interest” counseled compliance. And from most perspectives, it’s clear that the elites, not the underclass, were the first to wave a huge middle finger at basic norms of lawfulness.

A more problematic error, though, is Salmon’s claim that corporations have retained their legitimacy.

Looked at against this backdrop, the recent volatility in the stock market, not to mention the downgrade of the US from triple-A status, makes perfect sense. Global corporations are actually weirdly absent from the list of institutions in which the public has lost its trust, but the way in which they’ve quietly grown their earnings back above pre-crisis levels has definitely not been ratified by broad-based economic recovery, and therefore feels rather unsustainable.

As a recent Pew poll shows, Americans are just as disgusted with banks and other large corporations as they are with their government.

While anti-government sentiment has its own ideological and partisan basis, the public also expresses discontent with many of the country’s other major institutions. Just 25% say the federal government has a positive effect on the way things are going in the country and about as many (24%) say the same about Congress. Yet the ratings are just as low for the impact of large corporations (25% positive) and banks and other financial institutions (22%). And the marks are only slightly more positive for the national news media (31%) labor unions (32%) and the entertainment industry (33%).

Notably, those who say they are frustrated or angry with the federal government are highly critical of a number of other institutions as well. For example, fewer than one-in-five of those who say they are frustrated (18%) or angry (16%) with the federal government say that banks and other financial institutions have a positive effect on the way things are going in the country.

But there are institutions that Americans still trust: colleges, churches, small businesses, and tech companies.

Distinguishing between those institutions (government and big corporations) people distrust and those (churches, small businesses, and tech companies) they do is important for several reasons. First, because it prevents us from assuming (as big corporations might like us to) that Americans will be content with corporatist solutions. People may or may not like the the post office, but there’s no reason to believe they like FedEx, Comcast, AT&T, or Verizon any more, particularly the latter three, which all score very badly in customer satisfaction. (Update: as joberly points out, Pew found that the postal service was by one measure the most popular government agency, with 83% of respondents saying they had a favorable view of the postal service.)

Such polling also suggests where Americans might turn during this convulsion. Barring Apple buying out the federal government, it seems likely Americans, at least, will turn to local institutions: to their church, their neighborhood, their local businesses.

That’s got some inherent dangers–particularly if people decide they want to change my governance with their church. But it also provides a nugget of possible stability amid the convulsion, one that might have salutary benefits for our environment and economy.

Apple aside, it’s the big institutions that have lost their institutional legitimacy. But we’re not entirely without institutions with which to rebuild.

2 Funny Things about Obama Administration’s Effort to Pressure Eric Schneiderman

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The NYT has an article about efforts to strong-arm Attorney General Schneiderman to get him to put rule of law aside for yet another bank bailout.

First, it quotes HUD Secretary Shaun Donovan as saying,

The disagreement is around whether we should wait to settle and resolve the issues around the servicing practices for him — and potentially other A.G.’s and other federal agencies — to complete investigations on the securitization side. He might argue that he has more leverage that way, but our view is we have the immediate opportunity to help a huge number of borrowers to stay in their homes, to help their neighborhoods and the housing market. [my emphasis]

And it quotes DOJ spokeswoman Alisa Finelli saying,

The Justice Department, along with our federal agency partners and state attorneys general, are committed to achieving a resolution that will hold servicers accountable for the harm they have done consumers and bring billions of dollars of relief to struggling homeowners — and bring relief swiftly because homeowners continue to suffer more each day that these issues are not resolved. [my emphasis]

You see, the Administration has an “immediate opportunity to help a huge number of borrowers stay in their homes,” without any action from Eric Schneiderman. They have a way to do so more swiftly, in such a way the servicers actually would be held accountable. It would involve offering refis with principal reductions to all the underwater homeowners whose loans are owned by Fannie and Freddie. That would not only help a huge number of borrowers stay in their home, but it would be massive stimulus.

But instead they’re sending Donovan to pressure Schneiderman to pursue a measure that would benefit far fewer homeowners and probably take more time, while putting the last nail in the coffin of the rule of law in this country.

And then there’s Kathryn Wylde, who spins her shilling for Bank of America as an effort to protect NYC’s “Main Street.”

The lawsuit angered Bank of New York Mellon, and as Mr. Schneiderman was leaving the memorial service last week for Hugh Carey, the former New York governor who died Aug. 7, an attendee said Mr. Schneiderman became embroiled in a contentious conversation with Kathryn S. Wylde, a member of the board of the Federal Reserve Bank of New York who represents the public. Ms. Wylde, who has criticized Mr. Schneiderman for bringing the lawsuit, is also chief executive of the Partnership for New York City.

[snip]

Characterizing her conversation with Mr. Schneiderman that day as “not unpleasant,” Ms. Wylde said in an interview on Thursday that she had told the attorney general “it is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

Now why would Wylde believe she’s a more appropriate person to decide what is “defensible” than NY’s top state law enforcement official?

And while Wylde is directly doing the bidding of BNYM, ultimately this is about saving Bank of America from admitting that it is insolvent.

You know … Bank of America.

One of just a few of the big banks that is not headquartered in NYC?

One that considered–and then decided against–moving its HQ and related jobs to NYC a few years ago?

Why is Kathryn Wylde fighting so hard to get an elected NY official to put his constituents’ interests behind the interests of a Charlotte company? Why is the CEO of the Partnership for New York City working so hard to benefit a company that doesn’t even want to move to her city?

But then this effort to further erode rule of law isn’t about constituencies–about actual people rather than Mitt’s corporate people–is it?

Update: Nail, coffin, fixed. per Fractal.

Register of Deeds Curtis Hertel: “If you or I committed this kind of fraud, we’d go to jail.”

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In Lansing today, Ingham County (Lansing Area) Register of Deeds, Curtis Hertel and State Rep Jim Ananich presented a bill to introduce judicial foreclosure in MI.

As part of the press conference, homeowner Bill Donahue described how he almost lost the home he has lived in for 25 years because Fannie Mae, which had not claim to his loan, foreclosed on him as he was being processed for a HAMP modification (which he ultimately got).

Last May, he applied for a HAMP modification. After submitting a second round of paperwork in June, he was told in July he was in underwriting, which might take six months. During that period, Bank of America’s collection people kept harassing Donahue and his wife. By late summer, they received a foreclosure notice from Fannie Mae, which explained it was just a formality since he hadn’t made a payment in so long. BoA told him to ignore it, but it turned out his house was sold in a sheriff’s sale. In December, he got the HAMP modification, which cut their payment in half. Nevertheless, this April, a process server came to his house with a foreclosure notice. When Donahue showed him the document proving he had a mod, the process server congratulated him for being of the 5% or so who actually got mods. The server took copies. But in May, Fannie Mae sent a packet giving him 3 days to contest a foreclosure. Finally, by early June, Fannie dismissed the foreclosure. (I hope to have video from Donahue later.)

In his presentation explaining the importance of replacing MI’s current foreclosure by advertisement with judicial review, Hertel explained,

You can literally walk into my office and tell me you’re committing a crime and there is nothing I can do to stop you except report it. I still have to submit the documents.

Hertel later elaborated on this, revealing among other details that he recently received an FBI subpoena relating to foreclosures.

There were a few people at the press conference (including my own county clerk) who complained about the cost of instituting a judicial foreclosure system. Representative Ananich had the best response to those questions:

Due process isn’t a system that only works when it’s affordable or it’s convenient.

It’s nice to hear that sentiment from a few public figures.

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“A Public Service,” My Fannie

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I wanted to juxtapose two stories about Fannie Mae. The first, from this WaPo story reporting that the Administration has decided to keep some kind of federal entity guaranteeing mortgages. The story itself is interesting–as are Dean Baker’s post criticizing the underlying decision.

What I found particularly interesting, though, were the comments from the usual suspects about the role they perceive Fannie and Freddie as playing.

Two top Obama advisers, HUD Secretary Shaun Donovan and Treasury Secretary Timothy F. Geithner, think the government should maintain an outsize role in the housing market, administration officials said.

Donovan thinks federal support for housing fulfills a public service, while Geithner has been focused on the need for the government to have a way to keep the mortgage market operating during a financial crisis.

Other advisers, however, opposed a continued government role over the long run. Austan Goolsbee, who this month left his job as chairman of Obama’s Council of Economic Advisers, argued that the federal role in housing distorts the free market. By subsidizing mortgage investments, he argued, the government drives capital away from other types of investments — for example, those in companies developing environmentally friendly technology. He also warned that the government is putting enormous sums of taxpayer money on the line while conveying little actual benefit to home buyers.

In a meeting with the president, Goolsbee said that the government had finally brought Fannie and Freddie’s excesses to heel by taking over the companies and that it would be a mistake to let them loose in the market again, said a person familiar with the meeting. Goolsbee likened the companies to a villain held in a special prison who shouldn’t be freed just because he promises to help the poor, the source recounted.

Lawrence H. Summers, who was director of the National Economic Council until early this year, argued that, over the long term, it didn’t make sense to have a government-backed agency providing guarantees to the mortgage market but that Fannie and Freddie still play a crucial role.

“My position was that we needed to maximize activity in the short run to support the housing market,” Summers said in an interview. “Discussions of scaling down Fannie and Freddie were vastly premature under the circumstances of a collapsing housing market.” [my emphasis]

Compare those comments–particularly those favoring the GSEs from Donovan and TurboTaxTimmeh–with the description of the way Fannie Mae is fleecing the taxpayers and ruining communities by pushing servicers to foreclose even though homeowners are seeking a modification, an approach that violates Fannie’s own stated policy.

The documents show Fannie Mae has told banks to foreclose on some delinquent homeowners — those more than a year behind — even as the banks were trying to help borrowers save their houses, a violation of Fannie’s own policy.

Fannie Mae has publicly maintained that homeowners would not lose their houses while negotiating changes to mortgages under the federal Home Affordable Modification Program, or HAMP.

The Free Press also obtained internal records revealing that the taxpayer-supported mortgage giant has told banks that it expected them to sell off a fixed percentage of foreclosed homes. In one letter sent to banks around the country last year, a Fannie vice president made clear that Fannie expected 10%-12% of homes in foreclosure to proceed to sale.

[snip]

“Fannie just wants to clean up its balance sheet and get these loans off the books while taxpayers are eating these losses,” [Valpariso University Law Professor Alan] White said, referring to the multibillion-dollar federal bailout of Fannie Mae in 2008 and the rising cost to taxpayers.

“And Treasury and the FHFA are letting them get away with it. It’s a huge waste. Wealth is being destroyed, people are losing houses needlessly, and taxpayers are losing money.”

[snip]

According to White, the Valparaiso professor, foreclosing on a home typically costs Fannie Mae far more than a successful loan modification. But, he and others say, Fannie is willing to absorb higher losses because it knows taxpayers — not Fannie Mae — will eventually reimburse the loss.

In other words, even as Donovan and Timmeh appear to have won the argument on sustaining Fannie and Freddie (or something like them), what was implicitly clear (I’ve been hearing this accusation since 2009) has been proven: that the GSEs have been using their government backing to stiff taxpayers and ruin communities. (Kudos to Goolsbee who got it mostly right on this one: the taxpayer backing is providing little of value to taxpayers.)

It’s as if none of these folks overseeing Fannie know how badly it is screwing American communities. Or perhaps they don’t care?

Even as the Costs Become Apparent, Big Business Pushes to Legalize Bribery

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Last night, Jefferson County, AL delayed their decision for a month whether to declare bankruptcy or accept a settlement with their creditors and the state. At issue is $3.2 billion in debt, much of it for a sewer upgrade, that got dragged into the financial crash. The current deal would have creditors forgo a third of the debt in exchange for rate increases and the creation of an independent authotiry to run the sewer. County commissioners balked, though, arguing the deal relied on too many contingencies from the state–none of which are guaranteed–and took away any control at the county level. In short, it’s a mess, one that is costing the people of Jefferson County in increased rates and diminished services as the county struggled to find funding mechanisms to pay for the debt.

Yesterday, Reuters did a report summarizing all the bribery that went into the original sewer deal–and noting that JP Morgan hasn’t paid any reputational damage or loss of business for it, largely because it has blamed the deal on corrupt local officials.

JPMorgan Chase & Co. (JPM)’s Charles LeCroy said the key to landing bond deals in Jefferson County, Alabama, was finding out whom to pay off. In one example, that meant a $2.6 million payment to Bill Blount, a local banker and longtime friend of County Commissioner Larry Langford.

“It’s a lot of money, but in the end it’s worth it on a billion-dollar deal,” LeCroy told a colleague in 2003, according to a complaint filed by the Securities and Exchange Commission.

[snip]

Just 21 months ago, JPMorgan agreed to a $722 million SEC settlement to end a case over secret payments to friends of Jefferson County commissioners. The financings arranged by JPMorgan, a package of floating-rate debt and derivatives, exposed taxpayers to the 2008 credit crisis and dealt a blow that may lead the county to approve the biggest U.S. municipal bankruptcy as soon as today.

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Goldman’s Latest Scam: Turning Empty Space into Riches

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Who knew that Detroit was so commodity-rich it was ruining entire segments of industry?

Only, I presume Detroit gets little to none of the fortune Goldman is making by hoarding aluminum in warehouses in the city, thereby driving the price up and making millions on warehouse rent. This Reuters article describes the scam, but it works sort of like this.

The London Metal Exchange has rules to smooth out market prices for the commodities sold on its market (the rules thus serve the same goal as derivatives). As part of this, the exchange regulates over 640 metals warehouses around the world. The idea is, the metals can be stored there during recession, then used after the economy improves. The LME requires that a certain amount of metal must be delivered each day, to keep it flowing. But it sets those limits by city, not by warehouse. So in a city like Detroit, owning a concentration of warehouses allows a firm to create an artificial bottleneck in supply of the metal. And it’s costing the people who actually want to use aluminum to do something productive with it.

“It’s driving up costs for the consumers in North America and it’s not being driven up because there is a true shortage in the market. It’s because of an issue of accessing metal … in Detroit warehouses,” said Nick Madden, chief procurement officer for Atlanta-based Novelis, which is owned by India’s Hindalco Industries Ltd and is the world’s biggest maker of rolled aluminum products. Novelis buys aluminum directly from producers but is still hit by the higher prices.

[snip]

Premiums for physical aluminum — the amount paid above the LME’s cash contract currently trading at $2,620 a tonne — in the U.S. Midwest hit a record high of $210 a tonne in May, up about 50 percent from late last year. In Europe, the premium is at records above $200 a tonne, double the levels seen in January 2010.

The ripple effect into Asia has seen the premium paid in Japan increase 6 percent to $120 a tonne in the third quarter from the previous quarter, the first rise in nearly six quarters.

One of the keys to this scam is that the traders that own the warehouses also own the exchange.

The lack of real change has some in the industry questioning the very structure of the LME, which, unlike its publicly owned U.S.-based rival commodities exchanges, is owned by many of the financial institutions that trade there.

[snip]

That concern is growing. Critics of the exchange point to a potential problem with zinc supply though New Orleans, where inventories now account for 61 percent of total LME-registered stocks.

Most of the warehouses in New Orleans are owned by Goldman and Glencore.

And those same traders are buying up warehouse companies around the world.

Now, given that the two cities mentioned in this article–Detroit and New Orleans–are seriously hurting, it seems one solution would be for the cities to impose a tax designed to move product (presumably, such a tax would also create more work for those working in the warehouses). If concentrated empty space is their competitive advantage, why shouldn’t they stick it to Goldman?

The Blinds Spots of the Administration’s New Transnational Organized Crime Program

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John Brennan, Eric Holder, Janet Napolitano, and some other Administration bigwigs just rolled out the Administration’s new Strategy to Combat Transnational Organized Crime (TOC). Here’s how they define TOC:

Transnational organized crime refers to those self-perpetuating associations of individuals who operate transnationally for the purpose of obtaining power, influence, monetary and/or commercial gains, wholly or in part by illegal means, while protecting their activities through a pattern of corruption and/or violence, or while protecting their illegal activities through a transnational organizational structure and the exploitation of transnational commerce or communication mechanisms. There is no single structure under which transnational organized criminals operate; they vary from hierarchies to clans, networks, and cells, and may evolve to other structures. The crimes they commit also vary. Transnational organized criminals act conspiratorially in their criminal activities and possess certain characteristics which may include, but are not limited to:

It all sounds like they could be talking about Goldman Sachs or News Corp. But the specific crimes they mentioned are:

  • Drug trafficking
  • Human trafficking
  • Russian, Italian, Japanese mafia (in addition to Mexican drug cartels)
  • Counterfeiting

In other words, this initiative will look at very serious TOCs. But they won’t look at the TOCs that have done the most damage to the US in the last several years: the banksters that, through fraud, intimidation, and political influence managed to loot and then crash the economy. The same banksters that are now–frankly with DOJ enabling them–using their corporate structures to avoid any accountability for having crashed the economy.

That’s a problem. Because imagine what we could do to the banksters if we used any of the several following tools against them:

A new Executive Order will establish a sanctions program to block the property of and prohibit transactions
with significant transnational criminal networks that threaten national security, foreign policy, or economic interests.
A proposed legislative package will enhance the authorities available to investigate, interdict, and prosecute the activities of top transnational criminal networks.
A new Presidential Proclamation under the Immigration and Nationality Act (INA) will deny entry to transnational criminal aliens and others who have been targeted for financial sanctions.
A new rewards program will replicate the success of narcotics rewards programs in obtaining information
that leads to the arrest and conviction of the leaders of transnational criminal organizations that pose the greatest threats to national security.
An interagency Threat Mitigation Working Group will identify those TOC networks that present a sufficiently
high national security risk and will ensure the coordination of all elements of national power to combat them.

We could freeze Goldman and its executives from using their ill-gotten goods. We could recruit new whistleblowers, rather than jailing them. We could throw “all elements of national power” to combat Goldman.

Instead, we’ve been funneling trillions to them.

Now I don’t mean to be glib with this observation. The Administration is about to roll out a law enforcement regime that applies terrorist-like authorities to combat the TOCs it believes are illegitimate. While I haven’t seen the bill the Administration is proposing, it seems that the taint of illegality in one part of the TOC will qualify that TOC for such terrorist-like treatment across the network.

Except if you’re a bankster. Because if you’re a bankster, the government will use all its resources to ignore or settle the crimes that lay at the heart of your TOC, just so it doesn’t have to face the illegitimacy of the TOC as a whole.

But I guess that’s what the Administration expects to drive our economy.

Why Push Elizabeth Warren to Join America’s Most Ineffective Body?

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The news reports in the lead-up to this weekend’s announcement that Obama was ending the career of yet another prescient female bank regulator, this time even before it started, prepped the progressive community to champion an Elizabeth Warren run for Ted Kennedy’s MA Senate seat.

And so the usual suspects are out in force arguing that Warren would be better off running for Senate than she would be shaming Republicans for trying to kill off the CFPB.

Whoever is nominated to lead the CFPB is going to spend the next year of his life being filibustered by Republicans. The very best he can hope for is a recess appointment, in which case his tenure in the position would be relatively swift. So the question isn’t who you want leading the CFPB for the foreseeable future. It’s who you want spending his or her time being stopped from leading the CFPB for the foreseeable future. And it’s not clear that the answer to that question is “Elizabeth Warren.”

Warren, after all, has another option that she appears to be taking seriously: challenging Scott Brown in the 2012 election. For reasons I’ve outlined here and Bob Kuttner elaborates on here, there’s reason to think she would be a very effective candidate. But if she wants to do that, she can’t spend the next year being blocked from leading the Consumer Financial Protection Bureau. She has to spend at least part of it preparing for her candidacy.

Now, I don’t think there’s any doubt that Warren would prefer to lead the agency she’s built than launch a Senate campaign that may or may not succeed. But launching a Senate campaign that may or may not succeed seems like a clearly more effective way to protect her agency and further her ideas than being blocked from leading the agency she’s built.

Not only does this view not even consider whether Warren–or a relatively unknown midwestern politician–would be more effective making the public case for the bureau.

But it also seems to confuse the value of running for Senate with actually serving in the Senate.

What the people hailing a possible Warren run are arguing, effectively, is that the consolation prize for the banks having beat her on CFPB should be junior membership in a body that–as Dick Durbin has told us–the banks own.

Even putting aside the power of the banking lobby in the Senate, under what model would Senator Warren be effective championing progressive values, or even just “protect[ing] the agency she’s built”? Even assuming the Democrats kept the same number of seats they currently have on the Senate Banking Committee, even assuming Democratic leadership has already promised her the seat that Herb Kohl’s retirement will open up, that will still make her one of just three progressives (the other two being Jeff Merkley and Sherrod Brown) on a committee that has long been actively working against her CFPB candidacy. Even assuming Democrats keep the Senate, how amenable is Chairman Tim Johnson–a bank-owned hack–going to be to Warren’s ideas? If Richard Shelby were Chair, it’d be even worse.

And what about Warren’s effectiveness in the Senate as a whole–that body, under Democratic leadership, where good ideas go to die? Name a progressive Senator who has been able to do much to champion progressive ideas there? Sanders? Franken? Whitehouse? Sherrod Brown? I love all those guys, and like Sanders and especially Franken, Warren would presumably be able to leverage her public support to push some ideas through. But are any of them more effective at championing progressive values than Warren was before her White House gig, when she regularly appeared on the media and excoriated the banks in terms that made sense to real people? Just as an example, Byron Dorgan used to be effective before his progressive, deficit-cutting ideas were killed by the leader of his party. Similarly, Ted Kaufman turned out to be a surprisingly effective check on the banks, but that was partly because he came in knowing he’d never run for election (and he also knew, coming in, the tricks a lifetime of service as a Senate aide teaches).

Don’t get me wrong. I understand why the Democratic Party would like to have Warren in the Senate. I even understand how Warren might consider a Senate seat to be similar to her earlier public position, with the added benefit of having one vote to push progressive issues. I don’t dismiss the likelihood that Elizabeth Warren might be able to prevent a sixth corporatist judge from getting a lifetime seat on the Supreme Court.

I don’t think a Senator Elizabeth Warren would be a bad thing–I just think folks are far overselling what good it would bring.

It really seems the push for a Warren Senate candidacy ignores what a Booby Prize membership in the Senate has become of late.